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Ajaz Ahmed, a Founding Director of Freeserve on the ISP's success story and his new career as a Non Executive Director / Advisory Board Member.
Ajaz Ahmed is one of those people who enjoyed huge success from the inflation of the Internet bubble in the late 1990s. However, he wasn't a slick venture capitalist or an investor who exited at the right time, or even a technologist with a brilliant product. Ajaz's success was a classic shop floor to boardroom ascent based on entrepreneurship and a canny idea to bring Internet service provision to the mass market via the Dixons spin off, ISP Freeserve.
Ajaz began working with Dixons on the shop floor as a school leaver in 1981. Back then his training was retail based, and he learnt the importance of making every square inch of shop space pay for itself. By the time he quit the Dixons group to become a director of Freeserve, Ajaz had risen to the position of store manager for Manchester-based PC World.
He got the idea for setting up an ISP when he bought a PC from Dixons in 1995 and discovered the staff couldn't advise him how to get connected to the Internet. After working out a relatively raw business plan with Peter Wilkinson (founder of Planet Online) and Dixons director John Pluthero, Ajaz presented the idea to Dixons' CEO, John Clare, who immediately liked what he saw.
With an initial upfront investment of £240K, the service was launched on the 22nd September 1998. Less than two years later Dixons floated Freeserve for £1.5 billion on the LSE.
"We only had a handful of staff and costs were low but we changed the rules for Internet service provision and started a whole new industry in Europe. It was great to be there but they were crazy days!"
After selling his stake in Freeserve to French ISP Wanadoo last year, Ajaz set up Peerless Technology and floated it on AIM for £2.5 million. He describes Peerless as "a shell company with plenty of cash in the bank" looking for suitable acquisition targets.
These days Ajaz is combining his new media expertise and old-fashioned 'bricks and mortar' retail management skills to focus on small technology companies where he sits as a non-executive director on a number of boards. Ajaz feels his experience from establishing Freeserve has made him a useful non-executive director for new media companies which need stronger business focus.
"What I can bring to any business is experience of the Internet industry, a solid retail background which is all about the bottom line, plus I know a lot of people in the business."
So far, Ajaz has seen positive effects on the companies he has joined as a non-executive including Get Media, a content and services company providing a range of SMS, interactive voice response (IVR) and white label content solutions for mobile phone customers. "When I joined, the company had developed some music software technology which enabled users to learn how to play guitar along to music. However, there was no demand in the market for it and it wasn't selling. I advised them to get into the mobile space and now they are doing very well."
Ajaz has also become involved with Voice over Internet Protocol (VoIP) service provider Call Serve, a company dedicated to providing low cost voice services for developing countries using its own proprietary software client. He says his primary focus when looking at helping start up companies is to examine the business case. "That has to come before looking at the technology," he says.
One company that Ajaz has not only joined as a non-executive, but one which he also invested in via Peerless, is Manchester-based Zest Media - a front end website developer.
"The new media industry, particularly website development, is inefficient and shrouded in mystery," he says. "Too many client companies were getting ripped off and now that part of the industry is suffering. However, I do see an opportunity to simplify the process of getting a website built. The sector needs proper business practices and transparency in pricing when developing primary models for clients. This should help them get over their fears."
Are you considering whether a non-executive director may be beneficial to your company? Or perhaps you'd like to offer your services in this type of role?
Non-executive directors are regarded by many as only applicable to PLC's and a non-commercial organisation called PRO NED was set up by the Bank of England, amongst others, several years ago to provide such individuals and to ensure that they were both trained and qualified.
Several major studies into the roles and responsibilities of non-executive directors have been produced by successive governments, but again these have largely been appropriate mainly to PLC's. Indeed, many smaller PLC's and companies in the AIM market who tried to adhere to their rules found themselves almost bankrupted in the attempt.
Ajaz says it is crucial to establish what you're looking for (or what you aim to be, if this is a role you're considering undertaking). Here are the two main ways of viewing the contribution a non-executive can make:
(i) An independent voice on the Board who can bring both specific talents and a breadth of experience, who can challenge existing thinking, and help avoid some of the pitfalls.
(ii) Someone who 'knows people in the City', plays golf with the Chairman, and/or has junior Ministerial experience.
As far as the SME sector is concerned, number (i) applies, if you're thinking along the lines of (ii) Ajaz suggests you think again!
"The appointment of a non-executive director to an SME Board should be approached as carefully as any other crucial senior appointment. A thorough analysis of the requirements of the role, and the type of person who will work well with the existing Board will reap rewards.
"Similarly, those considering offering their services as a non-executive director should take a long, hard look at their own career in order to see which type of opportunity is going to succeed both for them and the Company they join", he adds.
And how to make it succeed?
"Decide what you want from the relationship, but avoid focussing too closely on the fine detail - e.g. specifying a functional role within a certain industry. Although often not specified, the abilities to think strategically and see the wider picture are of great significance. Focus on what you can offer to a Board: what your strengths and weaknesses are; what type of business sector (and type of organisation) are you able to contribute substantial expertise.
Today Ajaz is enjoying the varied roles that have come his way as a result of his initial success with Freeserve. "I enjoy it tremendously and feel that I make a positive contribution to small companies that are trying to establish their businesses. If you can get a few of them, its not a bad living."
To contact Ajaz Ahmed, email him at ajaz@freeserve.com.
Mark Fowle, CEO of hosting firm Attenda, on how he secured further funding in this challenging market.
Raising VC cash these days is both a time and equity-consuming affair. Long gone are the times when entrepreneurs and finance directors merely had to fire up a Power Point presentation to get the funds flowing. Today, far greater scrutiny is placed on management calibre, business case and strategic model before investors will part with their cash.
One company that has managed to navigate these difficult waters is Attenda, a web hosting business based in the UK and Germany. Attenda is different from other hosting companies in that it looks after not just the websites of top companies in the retail and IT industry, but also maintains internal infrastructure and operational business support systems for clients such as Microsoft UK, Debenhams, Dell, Charcoal Online, the Jordan F1 team and KPMG.
All the companies in Attenda's client list run IP applications that are vital for their businesses. One, Interflora in Germany has a website which has handle 10, 000 transactions per month so reliability and scalability is crucial. Attenda rents data centre space and capacity to keep costs low while focusing on deploying its own software layer to manage services and applications for clients.
Attenda was launched in February 2000 with a £5 million first round of funding that took just two weeks to complete. A second successful round of £15 million was secured in November the same year. This took three months and a third round of £9 million was completed last July that took nine months of negotiations. Notice a pattern emerging here?
"Its almost comically hard to raise funds today," says Attenda's CEO Mark Fowle. "In this business sector, infrastructure management has been tarnished with the same brush that outsourcing has. The burn rate among some new companies is very high and investors perceive the whole market to be in a complete mess, which is not really the case."
Attenda managed its successful funding by approaching a combination of new and old investors. DLJ (CSFB) and UBS Capital were the initial investors in the business but Mark managed to bring Compaq and US-based MC Ventures into further rounds. In total Mark pitched to between 40 and 50 VC firms and he says that perhaps only half a dozen actually understood what his business was all about.
"The first round was in the 'good old days' and was easy but we made a lot of useful contacts which we kept in touch with throughout the life of the business. This enabled us to mix new investors with previous ones in the second and third round. It was still time consuming but the fact that we had already pitched the initial funding plan did simplify things a lot."
"VCs today want to see a financial model that works and they will spend a lot of time working this out in your business plan," says Mark. "They also expect to see that the business will scale, has a good client list and has an experienced management team. Two years ago, you'd get a decision within days. Today, it takes months."
Although VCs are taking a more pro-active role in their portfolio companies and try to add more value, Mark says this can have both advantages and disadvantages. "The level of due diligence these days is like taking a sledgehammer to a chestnut. Many VCs still don't ask the right questions. They're bright guys but they still need to understand the Internet business a lot more than they do."
Despite the difficulties, Attenda has won its battles so far and has enough cash in the bank to concentrate on what they will do with it. Mark says the client base remains as strong as it was before and his target audience is right.
"We're good at operations and keeping costs down for clients and we understand how Microsoft technology works in the enterprise. We will continue to focus our efforts around operational and service management and IT strategy," he says.
To contact Mark Fowle, email him at mark.fowle@attenda.net.
Ivan Bernard Brunel, at Crescendo Ventures in Europe on the state-of-play of the VC marketplace, and how entrepreneurs should position their businesses to attract support.
According to Crescendo Ventures' managing general partner, R David Spreng, VCs spend a lot of time trying to imagine what the future will look like, but these days, he says it is even more important to imagine what the venture capital industry itself will look like ten years down the road.
It's a view shared by Ivan Bernard Brunel, Portfolio director for Crescendo in London. Ivan has is in no doubt that the VC industry will continue to perform a crucial role in global economy by fostering entrepreneurialism. However, at the same time, VCs must adapt and keep pace with the evolution of an ever-changing industry.
"What's crucial today is that VCs contribute a significant value add and this is even more important in a downward market," he says. "We were doing this 18 - 24 months ago but its even more important now."
While it can be said that during the 90s some VC firms dabbled in alchemy - the belief that the VC industry and the "new economy" could somehow defy fundamental economic rules - Crescendo partners believe that economic history teaches a valuable lesson: that professionalism offers a critical edge over competition.
"It has become a lot harder to predict revenues going forward so consequently, cost control is very important. It's also rather more difficult to know when or even how you are going to exit," Ivan says.
The key for Ivan and his team is to partner with the best possible start-up management team, remain flexible and have a strong syndicate of local VCs in place. "Boards are very important these days. You need to have people on them who can really add value to a start-up. We make sure we identify every single person who could be relevant to that company so they have the best chance of success."
On the financial side, Ivan believes in strict cost controls. "We can't fund a company that requires more than $25 million to break even. Its simply a question of cost efficiency," he says. Consequently, he is not supportive of companies that require significant in-house manufacturing. "If you can outsource it, do it," he says.
Core network and network optimisation start-ups are the primary focus for Crescendo at the moment. He thinks that wireless networks still have a lot of problems that need to be sorted before spending cash on application development. For this reason application developers are not high on the list of priorities at present. "It's a difficult business and it's even more difficult to make money on an application right now. There are network problems that need to be sorted out and building application before the network is ready is the wrong way to proceed."
Right now, Ivan believes the killer application on wireless networks remains voice and will be for some time to come. "Higher quality voice of voice traffic will be the killer app for a while. There is an unnatural push for data apps because operators have to justify their 3G license fees over the next ten years, but this is completely forcing the issue."
"The government should have returned the license fees to operators, but they won't. I think the government will leave telecoms companies to themselves to sort out the mess. Delayed roll-outs will hit people like Nokia very hard but everybody in the application development value chain will suffer too," according to Ivan.
Dismal news? Perhaps not as Ivan says that investors are more realistic in terms of what they can expect in the way of returns.
"It takes time to build companies", he says. "We used to think we could make a quick return but we also know that those days have gone now. You have to be in it for the long term."
Right now and going forward, the focus for Crescendo is on communications technology in North America, Israel and Europe. "We will cherry pick investments in these regions but I would advise entrepreneurs seeking funds to identify good early stage tech VC firms in their local market. We do a lot of pro-active research in many countries and often find targets by contacting local VC firms," he says.
As far as Ivan and the other partners at Crescendo are concerned, no time more than the present illustrates the need for professional management and organisational discipline on the part of VCs. If firms want to emerge from the present state of market disarray, he says they will have to reassess their traditional methods of making decisions, adding value and serving their various constituencies.
As managing partner R David Spreng says, "The recent boom-to-bust cycle is making VCs do a lot of soul searching. One of the positive outcomes of this cycle will be turning the way venture capital firms are run into the way real businesses are run."
To contact Ivan Bernard Brunel, email him at ibernardbrunel@crescendoventures.com.
Alternative innovative sales and marketing solutions for emerging companies.
Reaching Europe in changing times.
For technology companies, in house sales teams have traditionally been a key part of a company's business development program. However, this view is changing and the benefits of using an outsourced team of experienced technology sales professionals to deliver a European beachhead has now become established. There are differing drivers for this but the underlying ability to gain quality business development traction without building an onerous commitment is a common reason for this development.
The examples of where this applies vary. There are suppliers with a conviction that the market is ready for their products or services and they do not want to delay. They want to start the sales process as soon as possible while they commence the process of building their own sales infrastructure; and there are suppliers who believe that the market is turning but they just are not sure when the ideal time will arrive. They do not want the immediate and significant cost of a sales team but also they do not want to miss the wave when it comes.
In addition, there has never been a time when the need for quality professional sales people has been higher. This is because in today's market purchasers' budgets are under severe pressure and even some potential buyers do not know if they can spend the budgets that they have. To optimise the position in this climate experienced sales professionals are essential.
Faced with this climate new market entrants often had to make the choice between taking the time to establish a combination of expensive skills, not getting the optimal sales team and getting poor results, or not engaging at all.
Market Reach bridges the gap
Market Reach is built to manage this market gap. The services are designed for organisations requiring rapid European business development or market testing with the highest quality of Sales expertise. We deliver outsourced professional sales people and supporting services for technology companies and since Europe is a diverse market we deliver with a team of industry professionals who are based in the UK, Holland, Belgium, Luxemburg, Germany, Austria and Switzerland.
With the focus on getting orders our range of services concentrate on driving towards this goal. The services range from simple assistance for our customer's campaigns, to providing specific sales expertise, through to delivering complete multi-country managed sales and marketing programs.
Who are the Market Reach services for?
The companies will have a number of drivers that may include the wish to:
- Engage with potential customers to test the real opportunity for their products and services.
- Instantly establish a European business beachhead and get a fast track to start selling.
- Extend the reach and experience of an existing Sales team.
- Add a professional Sales and Marketing dimension to an existing operation with technical and operational strength.
- Show an immediate European dimension to the business.
Market Reach offers an immediate start up team that you can phase in, then out, as your business needs change. This team has expertise that can assist customers who focus in specific sectors. These customers will be suppliers to:
- The Communications Market.
- Fixed Network Service Providers.
- Wireless and Mobile providers.
- Content Providers.
Market Sectors such as Finance, Manufacturing, Distribution, Health, Police, and Government with vertical and/or horizontal Software Products or System products.
Brian Richardson, CEO and Founder Market Reach EU
brian.Richardson@marketreacheu.com
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